“Indeed, the central bank significantly lowered its real GDP growth forecast for 2015 reflecting the first quarter weakness, but it modestly upgraded the growth prospects of 2016 and 2017. Further, when judging the path of the target Federal Funds Rate, the Committee consensus implies lift-off for later this year, but also suggests we will see a shallower trajectory of rate increases in 2016 and 2017 than had been previously estimated,” Rieder added.
“Consistent with the Chair’s guidance, over the near term we expect two rate hikes in 2015 – in September and December – with a year-end fed funds rate of 0.75%, said Iain Stealey, manager of the JPM Global Bond Opportunities Fund. “We expect an additional four rate hikes in 2016 to 1.75% by year end. With that will come continued moderate volatility. Over the medium/longer term, we expect increased volatility as the market adjusts away from forward rate guidance, but that volatility will eventually be dampened by liquidity from central banks,” he added.
